Obama Mileage Rule Called Coercion for Carmaker Favorites

President Barack Obama hugs an assembly line worker as he tours the Chrysler auto plant in Detroit. Photo: Jim Watson/AFP via Getty Images

Aug. 10 (Bloomberg) -- A proposed rule requiring automakers
to double their average fuel economy by 2025 is unrealistic and
stemmed from a secret deal favoring companies receiving U.S.
government bailouts, according to a report released today by
House Republicans.

The writing of the rule, which the White House plans to
release next week in final form, was “a raw political process
designed to appease environmental extremists,” said the report,
written by the staff of House Oversight and Government Reform
Committee Chairman Darrell Issa, a California Republican.

“The impact of this process will not be immediate but will
be felt by manufacturers forced to make, dealers forced to sell,
and consumers forced to purchase far different, more expensive
and less safe vehicles,” the report, citing e-mails between
automakers and administration officials, said.

Issa has criticized the corporate average fuel economy, or
CAFE, rule proposed last year for model years 2017-2025.
Boosting average fuel economy is part of President Barack
Obama’s plan to reduce oil imports and use.

Issa’s report criticized the roles of environmental groups
and California, which has power to regulate vehicle emissions,
in a rule-writing process that included private meetings between
White House officials and auto executives.

Grow Backbone

A General Motors Co. executive said early in the process
that original-equipment manufacturers were frustrated by the
dominance of California regulators, according to an e-mail
released by Issa’s committee. The Detroit-based automaker was
trying to get Gary Guzy, deputy director of the White House
Council on Environmental Quality, to take a firmer stance
against the Californians.

“Everyone involved among the OEMs is frustrated by this
handling by the WH, but we gain nothing by publicly grousing or
simply walking away at this point,” Michael Robinson, GM’s vice
president for environment, energy and safety policy, said in a
Sept. 30, 2010, e-mail summary of early meetings. “Frankly, one
of my challenges here is to help Guzy do his job better and grow
some backbone with CA.”

California, the most populous U.S. state, has had stricter
vehicle-emissions standards than the rest of the country since
the 1960s. With its growing population and car-clogged cities,
the state has maintained tighter standards to comply with U.S.
clean-air policy.

The state maintains tougher emission rules for every air
pollutant other than carbon dioxide. That power allowed it to
act as a “gun to the head” of automakers in pushing for
tougher rules, the report concluded.

$192 Billion

The rule, and one that took effect this year for an earlier
period, could together cost as much as $192 billion, according
to administration cost estimates. The White House has said the
2017-2025 rule would save as much as $515 billion in fuel
spending and add an average of $2,000 to the price of each new
passenger vehicle by 2025.

The rules written by the EPA, California and the U.S.
National Highway Traffic Safety Administration had the support
of the United Auto Workers union, whose president, Bob King,
called them good for the economy, national security and the
environment.

Clark Stevens, a White House spokesman, declined to comment
on the report yesterday because he hadn’t seen it.

‘Unprecedented Agreement’

“Despite the efforts of a small few who are apparently
opposed to steps that will protect Americans at the pump and
reduce our reliance on foreign oil, the administration will
continue to take steps to support this unprecedented agreement
and ensure these savings for consumers are realized and the cars
and trucks of the future are built here in America,” he said in
an e-mail.

Republicans are attacking an agreement that saves consumers
money, creates jobs and decreases dependence on foreign oil,
Maryland Representative Elijah Cummings, the Oversight
Committee’s senior Democrat, said in an e-mail.

“Any allegations that the White House is seeking to weaken
the auto industry are simply ridiculous,” Cummings said. “This
is the White House that saved the auto industry from its near-collapse.”

A year ago, executives from companies including General
Motors Co. and Chrysler Group LLC, which received U.S. bailouts
in 2009, stood with Obama at the Washington Convention Center to
tout their agreement on the fuel-economy rule. Daimler AG and
Volkswagen AG, both German automakers, didn’t sign agreements,
saying the plan gives an advantage to light trucks, primarily
made by U.S.-based automakers.

Alleged Violation

The agreement broke a decades-long logjam on fuel-economy
regulations, said Roland Hwang, transportation-program director
at the Natural Resources Defense Council, one of the groups
involved in the discussions.

“No one wants to see Congress fighting progress toward
fuel efficiency, especially when the industry that is regulated
supports the agreement,” Hwang said.

California was involved in the negotiations at the
insistence of the automakers, who wanted the state to agree to a
single national standard to avoid having two sets for every
vehicle for the U.S. market, said Daniel Becker, director of the
Washington-based Safe Climate Campaign.

Nobody ‘Ecstatic’

“None of us is ecstatic that we got everything we wanted,
but all of us are willing to live with it, except Mr. Issa,”
Becker said.

Other e-mails released by the Oversight Committee show that
some of the automakers who signed onto the deal weren’t pleased.

GM’s Robinson emphasized in a June 2011 meeting that the 5
percent per year mileage improvement regulators were insisting
on wouldn’t work commercially. Additional “flexibility
mechanisms” should be considered, he said, including one for
adding hybrid technology to full-sized pickups.

Robert Bienenfeld, senior manager for environment and
energy strategy with Honda’s U.S. unit, said in a July 26, 2011,
note to top EPA and NHTSA officials that the Chevrolet Silverado
was the only vehicle on the market that could qualify for the
incentive they allowed for hybrid-electric vehicle incentives.

Honda’s U.S. unit endorsed the fuel-economy agreement in a
letter to the EPA and the Transportation Department three days
later. The company committed itself to working with regulators,
the states and other stakeholders “to help our country address
the need to reduce dependence on oil, to save consumers money,
and to ensure regulatory predictability.” The letter is on the
EPA’s website.